There’s little to celebrate this New Years for active fund managers who fell well short of index funds and ETFs in 2015. Ubiquitous industry presence Tom Lydon, president of Global Trends Investments, breaks down the bad news.
“Many expected this to be the year that active mutual fund managers would be able to pick and choose their battles and generate alpha for investors,” Lydon explains in his latest EFT Trends analysis. “However, active managers continued to underperform benchmarks, bolstering the case for low-cost, passive index-based exchange traded funds.
He cites Goldman Sachs research that found only 27 percent of large-cap core funds beat the S&P 500, which was also below the 10-year average of 36 percent.
Meanwhile, he adds that S&P 500 index-related ETFs, including the SPDR S&P 500 ETF, iShares Core S&P 500 ETF and Vanguard 500 Index, gained about 1.9% this year.
“Weighing on active managers’ portfolios, most stock pickers under-allocated to many of the stocks that experienced the biggest gains,” Lydon concludes. “For instance, fund managers missed out on Netflix and Amazon, the two best performing components of the S&P 500.
Read Lydon’s full analysis here.